Monthly Archives: February 2013

The U.S. Consumer Financial Protection Bureau is considering action to limit the impact of payday and other short-term loans that can become “debt traps”for borrowers, said Director Richard Cordray.

“Financial products that can trigger a cycle of debt may generate substantial unexpected costs through repeated use, which can disrupt the precarious balance of consumers’ financial lives,” Cordray told the National Association of Attorneys General in a speech in Washington yesterday. “Often these products are marketed as short-term solutions to an emergency need, obscuring the risks inherent in the terms of the loan.”

Tougher rules on short-term credit could crimp revenue at banks such as Wells Fargo & Co. and Regions Financial Corp. that offer such loans. CFPB action could also affect non-bank firms that engage in payday lending, such as Cash America International Inc., EZCORP Inc. and DFC Global Corp.

The remarks by Cordray may mark the beginning of additional efforts by the agency to address potential abuses in the area of short-term lending, especially so-called payday loans.

The agency plans to extend its consumer complaint system to include short-term credit in the third quarter of this year, according to two people briefed on the bureau’s plans. Before that, it plans to issue a report on the repeated use of payday loans and short-term bank credit often referred to as deposit advance products, the people said.

Protecting Consumers

“We have been analyzing these situations and will be determining how to exercise our authorities to best protect consumers while preserving access to responsible credit,”Cordray said. “There is a clear demand for short-term credit products, which can be helpful at times for consumers who use them responsibly.”

In his remarks, Cordray stressed the CFPB’s determination to address the problem of “debt traps.”

Consumer groups use the phrase to describe the downside of payday loans, a type of loan in which borrowers provide as collateral a postdated check for the amount of the loan plus a fee. Many of the transactions are now made online, with borrowers authorizing lenders to debit their account electronically when the payments fall due.

Consumer advocates argue that consumers may start as occasional users but get hooked as they need a new loan to cover old debts. Advocates like the Durham, North Carolina-based Center for Responsible Lending argue that payday lending is essentially usurious. Fees can result in annual interest rates as high as 521 percent, according to the bureau.

Repeat Use

In his remarks, Cordray didn’t refer to directly to payday lending, but expressed concern about frequent users of short-term credit.

“The economics of the product are premised on the repeat use of the product by a certain subset of customers,” Cordray said. “Depending on the precise terms and conditions of such loans, they can greatly harm consumers rather than help them.”

The payday lending lobby has sought to defuse this criticism by emphasizing that they compete with other de facto lending products, such as checking overdraft fees.

Jamie Fulmer, senior vice president of public affairs for Advance America Cash Advance Centers Inc., a payday lender, said his company’s customers typically get eight loans a year. The company also offers customers in some states the ability to extend their loan terms. Advance America was acquired by Grupo Elektra SAB last year.

“We work with each customer to ensure they understand the terms of their loan and can repay it,” Fulmer said by e-mail.

‘Dig Deep’

At a field hearing in Birmingham, Alabama, on Jan. 19, 2012, Cordray said the agency hears “a lot” about repeated, long-term use of payday loans.

“We plan to dig deep on this topic to understand what consumers know when they take out a loan and how they are affected by long-term use of these products,” Cordray said at the time.

In his remarks yesterday, Cordray promised to work with state attorneys general when they encounter “jurisdictional issues” related to products that can lead to debt traps. For instance, Colorado attorney general John Suthers is attempting to investigate a payday lender that claims sovereign immunity because it is affiliated with a Native American tribe. Other states are probing lenders who operate offshore.

“We also recognize that effective enforcement of the law can be challenging when it comes to lenders that lack a physical presence,” Cordray said.

Sam Olens, the attorney general of Georgia, said attorneys general would welcome federal action to limit the ability of lenders to affiliate with Native American tribes.

“This is an area where Congress should tighten the laws,”Olens said in an interview.

Customers are making more retail purchases, but they’re still paying down debt, not adding more.

After several years in the wilderness, the American consumer is back. Well, sort of.

A number of economic indicators point to an increase in consumption suggesting that the consumer, who drives much of the U.S. economy, is willing to loosen the purse strings. Banks report more requests for credit. Car sales are surging. The fortunes of many retailers are improving.

Less clear, however, is to what degree Americans are going to be willing to take on more debt and spend more freely. The psychological scars left by the devastating financial crisis of 2008 and the Great Recession remain.

“Part of this story, beyond this month or this quarter, is the new austerity within the consumer market — both paying off debt and building up savings. That’s not going to go away,” said Ken Goldstein, an economist with the Conference Board, a New York-based research group. “It may ease up a bit, but we’re not going back to pre-Great Recession. That world is done.”

In that prerecession world, consumption accounted for about two-thirds of U.S. economic activity. Almost a decade of easy lending led consumers to buy more home than they thought possible, borrow heavily against their homes, rack up huge credit card debt and live beyond their means.

The financial crisis and deep recession brought that to a halt. It forced consumers and businesses alike to pay down their debts, sometimes referred to as deleveraging. That’s a fancy way of saying consumers worked to lower their debt-service ratios, essentially the percentage of their disposable income that’s gobbled up by repaying loans.

Here’s where that stands: Federal Reserve data show that in the third quarter of 2007, the peak of their indebtedness, consumers had a debt-service ratio of 14.08 percent. Think of it as $14.08 out of every $100 going to pay off debt.

In the same quarter of 2012, that ratio had fallen to 10.61 percent. Consumers have been shedding debt like a bad habit. That’s good for personal finances, but not so good for an economy driven by consumption.

“The wounds of 2008 and 2009 may be four or five years ago, but they’re still fresh. There are still many people unemployed or underemployed,” said Susan Reda, the editor of Stores, a trade magazine for retailers. “We’ve turned a corner, but they don’t think they’re on Easy Street.”

On the plus side, there’s been a bull market for stocks and rising home prices in much of the nation. Both make some parts of the population feel wealthier.

That psychological ­benefit runs up against changes in lending, however. Banks require bigger down payments for home purchases, and most homeowners no longer can freely borrow against their home equity.

Nobody wants to be in debt, but the average American household carries $117,951 in debt including mortgages, lines of credit, credit cards, student loans and car loans, all on an average annual household income of $43,000. This average debt amount may not be so insurmountable if you are in your mid-20s or 30s, since mortgages make up about $95,000 of that average debt load. However, if you are someone who is closer to the end of your working career, such a large amount may be almost unmanageable.

Debt’s Emotional Toll A study has shown that debt could be taking more than just a financial toll on you – it could be making you clinically depressed. For those who are nearer to retirement – between the ages of 51 to 64 – debt weighs the heaviest on your mind, and for good reason. With retirement nearing, it becomes clearer that there is no easy way out of this financial mess. However, it is not debt such as student loans or mortgages that tends to make people the most blue; credit card debt and payday loans are the most depressing.

Payday Loans and Credit Card Debt Payday loans are notorious for their high interest rates, and can charge up to $30 per $100 borrowed, or a whopping 30%. Once you get stuck in a payday loan cycle, it can be hard to break it, as repaying the loan means living on a lot less than you’re used to (or are able to) for the next paycheck or two.
As for credit cards, the average U.S. household’s debt is $15,950, and if we assume that the average interest rate is between 15 and 19%, that means this debt costs $2,392.50 to $3,030.50 a year in interest costs alone, or $199.37 to $252.54 a month. This sum may not seem like a lot if you’re young and still pulling in a steady paycheck, but those who are nearing retirement should consider whether they will be able to make such a debt payment on an average Social Security benefit of $1,230 a month.

Mortgages and Student Loans In addition, many people face long-term debt such as a mortgage and student loans on top of consumer debt. One in five households owes close to $34,703 in student loans and about $149,782 in mortgages, and not everyone has these loans paid off by the time they near retirement.

A Worst-Case Scenario In the grimmest scenario, someone who is currently drawing on Social Security could be paying about 20% of their net income each month to credit cards. Any payday loans would cost an extra $369 a month. This retiree would be spending a total of about 50% of their income each month on short-term debt. That leaves a little over $600 to pay the mortgage, line of credit, student loans and car loans, and on top of all that, they still have to eat.

The National Debt Finally, there’s each taxpayer’s share in the national debt, which currently stands at $16.483 trillion dollars, or $52,432.25 per U.S. citizen. This money will eventually need to be paid back. If the U.S. government decides to do something about that, debt-burdened consumers could find that higher taxes give them even less breathing room each month.

The Bottom Line Being in debt is never any fun at any age, but being in debt when you’re near retirement is one of the worst scenarios. The older you are, the more difficult it becomes to pay down your debt because your peak earning days are likely behind you. You could also lose your job and not be able to find another one as easily, or be forced into early retirement due to health issues. The sooner you clear your debt and take control of your money, the better. Don’t wait until it’s too late.

Four years ago, Elizabeth Warren was a Harvard Law professor crusading for the creation of a consumer protection agency to police the abusive practices that harmed millions of Americans during the financial crisis.

Now that Warren has taken office as a Democratic senator from Massachusetts, she is fighting from inside the system to keep the upstart Consumer Financial Protection Bureau’s power intact as her Republican colleagues vow to block the confirmation of CFPB director Richard Cordray.

Senate Republicans are urging President Obama to alter the structure of the bureau by subjecting it to annual appropriations and installing a five-member board for greater transparency and accountability. The White House, however, insists that the bureau remain an independent regulator.

Consumer groups say the GOP’s structural argument is an attempt to destroy the agency, after a failed campaign against its creation.

Working alongside Sens. Sherrod Brown (D-Ohio) and Jack Reed (D-R.I.), Warren held news conferences Wednesday and Thursday calling on Republicans to bring Cordray’s confirmation to a vote. In response to GOP claims that the bureau operates without controls, the senators noted that CFPB can be overruled by the Financial Stability Oversight Council and has a statutory cap on its funding.

“It is past time for an up-or-down vote,” Warren said Thursday. “The financial industry needs certainty, and families need to know there is a strong and independent watchdog on their side in Washington.”

The Senate majority leader, Harry M. Reid (D-Nev.), and banking committee chairman, Tim Johnson (D-S.D.), joined the fight Thursday by sending the president a letter, signed by 52 Democrats and two Independents, in support of the agency.

“Attempts to force re-litigation of issues related to CFPB’s funding and organization by filibustering Director Cordray’s renomination are irresponsible and inconsistent with our democratic values,” Reid and Johnson said in the letter.

Cordray’s nomination met similar opposition in 2011, which led Obama to install him through a recess appointment. The director’s term expires at the end of the year unless he wins approval.

Warren and her Democratic colleagues face an uphill battle. Senate staffers say Obama’s end-run has poisoned the waters for Cordray’s confirmation. Earlier this month, a group of 43 Republican senators sent a letter to the president promising to hold the confirmation hostage unless their demands are met.

“Far too much power is vested in the sole CFPB director without any meaningful checks and balances,” said Sen. Mike Crapo (Idaho), ranking Republican on the Senate banking committee, and Minority Leader Mitch McConnell (R-Ky.), in the letter. “We will continue to oppose the consideration of any nominee . . . until key structural changes are made.”

Efforts to dismantle the CFPB gained momentum last month, when a federal appeals court said the president exceeded his constitutional authority by making appointments when the Senate was on break. While the ruling was aimed at the three members of the National Labor Relations Board, it could help a separate lawsuit seeking in part to use the same constitutional argument to remove Cordray.

Despite the assault on the structure of the CFPB, the agency has been lauded by both consumer groups and the financial services industry for its work. The bureau has written several critical rules to reform mortgage lending and leveled enforcement actions against banks involved in deceptive marketing.

“This agency has proven what it can do,” Warren said. “The notion that a minority can hold up the laws of the United States by using a filibuster on an ­appointment is fundamentally wrong.’’

Bank of Canada Deputy Governor Timothy Lane said a long period of rising consumer debt and low interest rates pose a major risk to the country’s economy.

“Consumers have taken advantage of the stimulative financial conditions, including low borrowing costs and easy availability of financing,” Lane, 57, said in the text of a speech today at Harvard University in Cambridge, Massachusetts.“In doing so, they have pushed household debt to levels that pose a significant risk.”

Canada’s central bank kept its benchmark interest rate at 1 percent Jan. 23, where it has been since September 2010, and said the case for an increase was “less imminent” while cutting its economic growth forecast. Lane’s speech didn’t mention the outlook for the policy rate, and comes before Governor Mark Carney’s testimony tomorrow on the economy to Canadian lawmakers in Ottawa.

More houses are being built than what is in line with“demographic trends,” and some housing markets have“stretched valuations,” Lane said today.

Canada required stimulative policies to deal with a period of weak global growth following the world financial crisis, including the time it’s taking for the U.S. to reduce its debt levels, Lane said.

“This headwind has, in particular, been holding back Canada’s exports, which are far from recovering from their plunge at the start of the recession,” he said.

The risks from a period of “low for long” interest rates include investors that take excessive risks to generate bigger returns, as well as household imbalances, Lane said.

Canada’s housing market has “moderated” in recent months, Lane said, echoing comments Carney made in January. The central bank has predicted that consumer debt will stabilize around the current record of 165 percent of disposable income.

There are still risks that “household spending could regain momentum or that a more sudden weakening could occur,”Lane said.

In 2010, Marie from Crescent City, Calif., got a phone call from a bill collector who claimed she owed $500 for a purchase made on the Home Shopping Network (HSN) eight years earlier. The debt collection company told her that it had purchased the debt from HSN and demanded that she pay the full amount. But Marie disputed the debt because she had already paid it off.

This wasn’t the first time Marie had been harassed about the alleged debt. In 2008, a different bill collector contacted her with a similar claim. Neither bill collector could provide Marie with any details about what she had purchased or about the payments she had made. When Marie contacted HSN to get to the bottom of the matter, she was told that the records about her purchase were no longer available.

The problems Marie experienced happen all too often, according to a new report on the debt buying industry by the Federal Trade Commission. The FTC analyzed over 5,000 portfolios of consumer debt owned by nine of the largest debt buyers in the nation. It found that consumers disputed an estimated one million debts each year but that debt buyers were only able to verify 500,000 of those disputed debts.

Buying and selling debt has become a big business in the U.S. The FTC found that debt buyers typically purchase portfolios of debt for only four cents on the dollar, on average, and then collect on those debts for the full face value — which nets them a huge profit.

As the debt-buying industry has grown, so have debt collection abuses. In 2012, the FTC reported that it handled over 180,000 consumer complaints about debt collectors in the previous year, more than any other industry.

The FTC report noted that “[f]or most portfolios, buyers did not receive any documents at the time of purchase. Only a small percentage of portfolios included documents, such as account statements or the terms and conditions of credit.” Incredibly, only 13 percent of the sold accounts reviewed by the FTC were accompanied by any account documents.

Consumers Union, the advocacy and policy arm of Consumer Reports, issued its own report on the debt buying industry in 2011, which highlighted many of the same issues. The report, published with the East Bay Community Law Center, detailed how debt collectors are filing an increasing number of lawsuits against consumers even though many times they don’t have proof to back up their claims. Of course, without proper documentation debt collectors may sue on invalid debts, including those that have been paid already. To make matters worse, consumers often don’t receive timely notice that they have been sued or may no longer have good records to show whether the debt is owed or the amount claimed is correct because it is so old.

The FTC report called on states to strengthen their debt collection laws. The Consumer Financial Protection Bureau intends to use its authority to exercise federal oversight over the largest debt collectors, and we believe Congress should crack down on debt collection abuses as well.

The time is long overdue to enact some common sense reforms. Consumers Union has urged state and federal policymakers to adopt a number of protections for consumers, including:

End robo-signing and attempts to collect without proper documentation: Debt collectors should be required to document that they are attempting to collect from the right person, for the right amount, and on a debt that they can lawfully recover.

Establish a sell by date for all debt: It should be illegal to sell or attempt to collect debt that is more than seven years old, which is too old to be reported on a credit report under the federal Fair Credit Reporting Act.

Require debt collectors to provide more information to consumers: All debt collectors should be required to identify the name of the original creditor and to provide an itemized record of the total principal, interest, fees, and other charges that have been added to the debt, and to provide detailed records about the debt to consumers within five days after the first notification.

Require debt collectors to submit more detailed information when filing suit: Debt collectors should be required to submit basic information about the debt, including the name of the original creditor and an itemized record of the total principal, interest, fees, and other charges that have been added to the debt, when they sue over a debt, so that the consumer can see if it is his or her debt, and in the right amount.

Increase oversight to ensure consumers are properly notified of lawsuits: Courts should be required to provide supplemental notice of all filed debt collection lawsuits to debtors and default judgments should be prohibited if the notice is returned to the court as undeliverable.

Close to half of Americans are resolving to do better financially in 2013. Most want to focus on saving money for long-term goals, such as education and retirement, or for short-term goals like emergency funds. Nearly 20 percent are resolving to spend less and to pay off debt. If you are among those who want to focus on making financial gains, follow these suggestions to ensure that 2013 is a robust year.

1. Assess your financial situation.

Take a look at your last three months of credit card and bank account statements to get an idea as to where your money is going. Subtract your regular monthly expenses (mortgage or rent, utilities, groceries and credit card bills) from your monthly income (wages, child support and other sources of revenue). Use this information to create a monthly budget and figure out what expenses you could cut. Good places to start are with your daily latte, cable TV or dining out.

2. Check your credit reports.

You are legally entitled to free credit reports every 12 months from each of the three major credit bureaus: Equifax, TransUnion and Experian. You can request these reports online or via their toll-free numbers, or via annualcreditreport.com. Consider spacing out the requests throughout the year as a way to monitor future changes. You may want to check reports more often if you have been a victim of identity theft or fraud in the past, or have any other concerns. If you are planning to make a major purchase this year, such as a house or car, now is the time to fix any errors that could hurt your credit rating.

3. Devise a debt payment plan.

The “snowball” method of debt payment involves paying as much as you can toward your smallest debt while making minimum payments on all others. Once the smallest debt is gone, you add the amount that you were paying on it to the minimum you have been paying on the next-smallest debt — until it, too, is paid off. Repeat this process until you are debt-free. This method gives you a sense of accomplishment because you can see your efforts to wipe out debts. However, if you are carrying debt with sky-high interest rates, it is sometimes smarter to apply the higher payments to these debts (the “avalanche” method). You also may want to look into consolidating your credit card debt with one creditor. Moving debt to one card can make it easier to manage payments. Just make sure your credit balances do not rise above 50 percent of your available limits or else your credit score may take a hit.

4. Commit to savings.

Start considering savings a “bill” that you must pay — to yourself. You should ultimately aim to save enough to cover six to nine months of basic living expenses. Start small and work toward this gradually. Remember that these funds are only to be used for unplanned, major expenses like a health crisis, home repairs or unemployment. Figure out the minimum amount you can contribute to a high-interest savings or money market account — perhaps $50 to $100 a month — after living expenses and debts are covered, and do so regularly.

5. Don’t shortchange your retirement.

If possible, max out your retirement fund contributions. At the very least, make sure you are contributing enough to get your company’s full matching contribution if it offers that benefit. Consider taking any percentage salary increase that you earn each year and increasing your retirement plan contribution by that percentage.

6. Get your estate in order.

Half of Americans with young children, and 40 percent of those ages 55 to 64, do not have wills. It is all too easy to put off this task, but doing so could jeopardize all that you have worked for as well as the future of your loved ones. You do not need an expensive lawyer to make your final wishes legal. Online companies such as LegalZoom.com and BuildAWill.com provide do-it-yourself kits for fees ranging from $20 to $70.

Reaching financial goals can be challenging. Setbacks happen, but that is no reason to throw in the towel. Maintain your focus and you will soon enjoy the peace of mind that comes with financial security.

Big banks are bringing their fight for new customers from street-corner branches to mobile phones — where they’re getting a cheaper fix.

Strapped for new revenue and pressed into waves of cost cuts, the country’s largest banks are trying to keep the customers they have, woo the ones they don’t and do it all for less. In recent months, they have increasingly found one solution to all of those problems: the smartphones that can let customers deposit checks, pay bills and check their balances without ever stepping into a bank branch.

“It’s critically important. We have to be there,” says Tracey Weber, Citigroup’s (NYSE:C) managing director of consumer Internet and mobile banking for North America. “We find that once customers try mobile banking, it’s a very delightful, high-customer-satisfaction experience.”

It’s also a cheap one. Bank of America (BAC) Chief Executive Brian Moynihan, who is trying to cut $8 billion in costs, has promised that mobile and online technology will help the bank grow business while shrinking everything else. The price tag for that technology has been a relatively modest $500 million “over the past few years,” Moynihan said in December.

Better mobile technology is also shaping the strategy of new Citigroup CEO Michael Corbat, who is already closing down 44 U.S. branches as part of sweeping cost cuts. Now executives are debating even more drastic shrinkage of Citigroup’s branch network, according to a person familiar with the discussions, who spoke on condition of anonymity.

Citigroup spokeswoman Catherine Pulley declined to comment but pointed out that the bank has also opened five new branches recently.

Banks can potentially reach almost half of their customers with mobile banking: 45% of Americans own a smartphone like an iPhone or an Android, and 25% own a tablet like a Kindle or an iPad, according to Pew Research Centers. These potential customers tend to be young, and less wedded to sprawling bank branches with expensive tellers and empty lobbies.

PNC Financial Services (PNC) CEO James Rohr made the tradeoff explicit in September, telling investors that the bank would be able to lay off 40 to 45 tellers since it was booking 7,000 mobile transactions daily.

Banks are also trying to win the intensifying war for desirable customers, as the economy sluggishly recovers and appetite for new loans remains small. The biggest banks, including JPMorgan Chase (JPM), Bank of America, Citigroup and Wells Fargo (WFC), have all spent years developing mobile banking applications, in the hopes that their investment in that technology will eventually pay off.

“We are seeing a lot of customers starting to use mobile as their primary channel, and I think we’ll see that trend increasing,” says Ravi Acharya, senior vice president of digital services for JPMorgan’s consumer bank. “The power of digital is that for the first time, we’re able to improve the customer experience while being able to potentially reduce the cost.”

JPMorgan was one of the first big banks to unveil many mobile features, including the popular remote-deposit technology that allows customers to deposit checks by snapping digital photos of them. While some of these features still have the occasional glitch, they are increasingly popular with bank customers and available now at several banks, including smaller, regional companies.

“Mobile customers are more engaged and tend to stay longer,” he says. “People underestimate the value of keeping the customer … but customers who stay longer tend to be more profitable, they’re more engaged, they tend to buy more services from us.”

These are customers whom the banks want to keep. People who use mobile banking “tend to be younger and richer than the typical consumer,” and about 45% of them have at least $50,000 in investible assets with their banks, according to a November report from Javelin Strategy & Research, a unit of Greenwich Associates. The report also found that 43% of people using mobile banking earn at least $75,000 per year.

Mobile technology is increasingly popular with banks’ existing customers. Wells Fargo’s Armin Ajami calls the bank’s offerings “the fastest-growing channel in the history of the bank” and says that mobile banking usage has grown “twice as fast as online banking in the same time period, in the first five years” of its existence. The San Francisco bank saw a growth rate of about 30% in 2012, he adds.

“This opens up new conversations with the customer,” says Ajami, a senior product manager for Wells Fargo’s mobile banking. “Retaining customers is really key, and as you move forward, you’re deepening the relationship. Then you can have the conversation” when customers want more financial products.

Wells Fargo now has more than 9 million customers using mobile banking, while Bank of America and JPMorgan have about 12 million each. Citigroup would not provide specific customer numbers, but Weber called mobile “our fastest-growing channel” and said that mobile banking usage grew 81% year over year in 2012.

Mobile banking is available beyond the four largest banks; many industry members named U.S. Bancorp (USB) and USAA as two of the more pioneering banks in the mobile-banking industry, and regionals including PNC and KeyCorp (KEY) have also emphasized mobile banking in the past year.

But Bank of America has been the loudest convert to mobile in recent months, as Moynihan tries to convince investors that the bank has a future beyond retrenchment. This month he tied the bank’s 31% year-over-year growth in mobile banking customers to its branch closures, telling investors that the bank has “optimized” its branch network as “online and mobile banking numbers continue to increase.”

There are signs that this strategy is working. Bank of America was the most successful at wooing customers away from other banks last year, followed by JPMorgan, Wells Fargo and U.S. Bancorp, according to the consulting firm AlixPartners. Its June survey also found high adoption of mobile banking by customers who switched to B of A.

The past two years have been “a turning point” in the bank’s multiyear efforts to build up mobile, says David Godsman, head of online and mobile solutions at Bank of America.

“We believe that mobile’s growth will eventually transcend online banking’s use in the not-so-distant future,” he says.

He adds that customers who use mobile “interact with us more frequently, viewing transactions, banking on the fly. … Our customers like banking with us more, and it drives increased customer satisfaction.”

Customers are not yet leaving banks because they lack mobile features — but when they decided to switch banks for other reasons, mobile banking is a must-have at their new financial homes, executives and consultants say.

“The customers who are changing banks, they’re looking for what could really differentiate the next bank … and mobile can really make a difference,” says Bob Hedges, a managing director at AlixPartners. “It’s less that people are saying, ‘I’m going to change banks to get mobile,’ but when they change banks for the traditional reasons, what’s attracting them in their next decision is the mobile capabilities of the banks out there.”

Analyst Mary Monahan of Javelin agrees: “Mobile services are important to the overall perception of a bank. … It’s becoming an increasingly important criteria. It helps you create a distinct identity,” she says.

As a result, advertising what mobile features banks offer is almost more important than developing them in the first place. Banks including Capital One (COF) have increasingly emphasized mobile in their marketing.

None of the bankers interviewed would discuss specific spending, but they agreed that marketing mobile banking is crucial. Citigroup has invested in advertising its mobile features, Weber says, because “we think [they are] really important in how customers decide who they bank with and how they bank.”

JPMorgan’s Acharya agreed that “marketing for us is super important.” But execution also matters: “One of the big things is not just what we tell customers, but what customers tell their friends,” he says.